Nigeria’s biggest oil refinery fails to curb record petrol prices

The 650,000 barrels per day refinery, the largest in Africa, became fully operational earlier this year. It was designed to transform Nigeria into a major exporter of refined products after decades of insufficient refining capacity. In the past, that caused frequent fuel shortages but government subsidies kept pump prices low.

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President Bola Tinubu removed this protection when he took office in 2023, promising reforms that won praise from international investors.

Nigerians are now facing the shock of inflation of 65% – the largest among major African economies as the effect of the new refinery has been offset by the need to import expensive raw materials, even though Nigeria is the largest oil producer in Africa.

INTERNATIONAL OIL MAJORS KNOW THEIR ROLE

The problem stems from Nigeria’s financial system: the state-owned oil firm Nigerian National Petroleum Company Limited is tied to oil-backed loans and pre-export agreements.

That means that most of the 1.5 million barrels of Nigerian production per day are paying debts to banks, banks and international traders. NNPC does not disclose its commitment, but analysts estimate it to be around 400,000 bpd.

David Bird, the managing director of Dangote, told local TV that the company can only deliver about five goods a month in the region, much closer to the 13-15 required. It has to import the rest at prices dictated by the outcome of the Middle East war. In Nigeria the stock is usually around a million barrels.

The problem is getting worse because Nigeria does not have a fuel storage facility and the government has not started to take action to create one.

“The collection of policies would have protected Nigeria to some extent from the effects of rising prices and kept resources developed during long-term disruptions,” said Mikolaj Judson, an analyst at the consulting company Control Risks.

WAR IN IRAN CAUSES UNKNOWN DISTRIBUTION OF DISTRIBUTION

The disruptions in energy supply following the US-Israeli attacks on Iran, which began in late March, are unprecedented. As a result of this conflict, shipping through the Strait of Hormuz, which accounts for a fifth of the world’s energy supply, is effectively closed to commercial shipping.

International oil prices have soared above $100 a barrel, about 50% higher than before the war began, increasing the profits of many power elites, while governments and ordinary consumers grapple with the risk of inflation.

Between March 2 and March 21, petrol prices rose by about 10-17% in Ghana, remained unchanged in Kenya due to price controls, and increased by 1% in South Africa, according to industry and regulatory price data.

FINANCIAL PRICE IS RETURNED AFTER IT STARTS TO COOL

“We already feel like we are in Nigeria,” said Salau Sodiq, a 25-year-old frozen food seller in Lagos. “The prices of fish and poultry have doubled, customers are complaining, sales are falling, and it is becoming difficult for us to buy the goods we need.”

Ride-hailing drivers in Lagos last week staged a protest.

HEIGHTS ARE INCREASED AT HOME AND VERY SOMETIMES

It sets its petrol prices in line with international fuel and crude standards, based on freight and insurance costs.

The result was that it raised its full price by about 61% between early March, meaning consumers are paying about 1,400 naira ($1.02) per liter in Lagos and Abuja, the highest Nigerians have ever paid.

After meeting with Tinubu last week, Aliko Dangote, the president of Dangote Group, said the conflict in the Middle East will worsen economic problems across Africa unless it is resolved quickly.

Businesses and unions have called on the government for emergency aid, including tax incentives for refiners, a naira-based neutral supply and temporary energy cuts, while accelerating long-term energy transitions.

In the southern part of Oyo State, the governor approved a 10,000-naira transport allowance for government workers, to operate for three months from April, to help reduce the rising fuel prices.

But Wale Edun, Nigeria’s finance minister, said the government would not interfere with the “orderly system of market prices”, preferring to focus on ways to help people adapt.

($1 = 1,377.8300 naira)

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